Environment minister Tanya Plibersek has called on Australia’s two biggest supermarket chains to come up with a “viable solution” after they were forced to hit pause on their major soft plastic recycling scheme.

REDcycle announced late yesterday it was pausing collections at Woolworths and Coles, where customers were returning more than 5 million pieces of soft plastics every day.

The suspension came after the Age reported on Tuesday that soft plastic items were being stockpiled by REDcycle under the scheme rather than recycled.

REDcycle confirmed collections would stop from Wednesday, saying the two companies that took the recycled material couldn’t accept any more material, with a fire in a factory and “downturns in market demand” blamed.

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The Melbourne-based initiative recommended people dump soft plastics in their general waste bin, saying it was “committed to having the program back up and running as soon as possible”.

Both Woolworths and Coles said they would not be able to accept soft plastics for recycling and were now working on solutions.

“It shouldn’t be beyond these big supermarkets to come up with a viable solution to allow Australians to continue to recycle,” Plibersek said on Wednesday.

“I expect Coles and Woolworths to step up and indicate how they will deal with soft plastic recycling. We’re happy to work with them to achieve this.

“Their customers want to do the right thing, Coles and Woolworths should too.”

Earlier in the day, Woolworths said it was “disappointed” by the turn of events, saying it was working through options with the Australian Food and Grocery Council, the recycling industry and the industry-led voluntary Australian Packaging Covenant Organisation (APCO).

Coles said it was “working with government, industry and sustainability partners” to find a solution.

Plibersek said she had spoken with Coles, Woolworths and the Australian Food and Grocery Council about the responsibility supermarket businesses had to reduce packaging, replace it with less environmentally destructive alternatives and recycle any waste.

“Coles and Woolies agree, they do feel a need and responsibility to take action here and I’ve said the Australian government stands ready to assist them in taking that action,” she said.

She said the problem was difficult to address immediately and she was having discussions with the retailers about how to deal with the stockpiles of waste and “come up with better recycling options in the near term”.

Plibersek said the government had set aside $60m to increase soft plastic recycling and provided $1m to the Australian Food and Grocery Council to work with industry to develop more sustainable solutions for their soft plastics.

The NSW environment minister, James Griffin, said he had asked the state’s Environment Protection Authority (EPA) to immediately work with the Victorian EPA and Recycling Victoria to get an understanding of the challenges affecting REDcycle’s operations.

Tony Chappel, the chief executive of the NSW EPA, said the authority would “work with REDcycle to identify any excessive stockpiling issues and ensure that appropriate steps are taken to manage any potential risks”.

Jeff Angel, director of the Boomerang Alliance of more than 50 non-governmental organisations, said the collapse of the scheme revealed “deeper problems that must be fixed if the community is to have confidence in plastics recycling”.

“REDcycle has been the flagship of industry and government claims they are taking action on soft plastics recycling, but it has only ever been a small operation compared to the 336,000 tonnes of soft plastics used and dumped every year,” he said.

“The fundamental problem is the lack of a market to support an ongoing effort and this can only be fixed by mandatory recycled content rules, which to date have been opposed by industry and government.”

In a statement, APCO said it had commenced an independent review into soft plastics recycling last week after learning “of the severity of the situation” with REDcycle.

The APCO chief executive, Chris Foley, said: “We know that soft plastic is a challenging packaging material for Australia and we have to get better at managing it. This is a short-term glitch in the system largely related to the pandemic coinciding with unforeseen challenges experienced by reprocessing partners.”

He said the suspension of the REDcycle program was “a good opportunity for Australia’s brand owners and the packaging and recycling industries to pause and reset on how we manage soft plastics.”

“This reset will allow Australia to build ongoing sustainable pathways for soft plastic and APCO is working with industry stakeholders to resolve the issue and develop a strong, permanent solution.”